NEW YORK, Nov 14, 2013 (BUSINESS WIRE) --
Fitch Ratings has upgraded the Issuer Default Rating (IDR) of Public
Service Co. of Colorado (PSCo) by one notch to 'A-' from 'BBB+' and
revised the Rating Outlook to Stable from Positive. Fitch has also
affirmed the ratings of Xcel Energy, Inc. (XEL) and operating
subsidiaries Northern States Power-Minnesota (NSPM), Northern States
Power-Wisconsin (NSPW), and Southwestern Public Service Co. (SPS). The
Rating Outlook is Stable. A full list of ratings is included at the end
of this release. Approximately $11.19 billion of long-term debt is
affected by today's rating action.

KEY RATING DRIVERS FOR XCEL ENERGY

XEL's rating affirmation reflects the relatively stable operating cash
flows of its operating subsidiaries and the financial support it
receives from them in the form of dividends for the payment of corporate
expenses, debt service obligations, dividends to common shareholders,
and for other business matters. XEL's utility subsidiaries enjoy
relatively constructive regulatory frameworks across multiple
jurisdictions and exhibit limited fuel and commodity price risk due to
the ability to recover fuel and purchased power via separate cost
trackers.

The utility subsidiaries received relatively supportive regulatory
outcomes in the latest series of rate cases, notably in Colorado where
PSCo reached an electric three-year multi-rate plan where step-up rate
increases mitigate regulatory lag and provides regulatory predictability
through 2014. In Minnesota, NSPM was granted a rate increase of $103
million effective September 2013, compared to the $209 million it had
requested. The rate decision was less constructive than what Fitch had
originally anticipated and materially below what NSPM has received in
past orders. Fitch notes the 9.83% return on equity (ROE) authorized by
the Minnesota Public Utility Commission (MPUC) was about 50 basis points
below the ROE authorized in NSPM's previous rate case.

In November 2013, NSPM filed a new two-year electric rate case
requesting a relatively sizeable rate increase of $291 million. Balanced
outcomes in future rate proceedings at PSCo and NSPM will be critical to
maintain XEL's ratings at current levels, given that the two
subsidiaries account for approximately 82% of consolidated EBITDA. Fitch
expects NSPW and SPS to seek ongoing rate relief over the forecast
period and achieve regulatory outcomes that are consistent with the
constructive rate orders from completed electric rate cases in
Wisconsin, Texas, and New Mexico, where the utilities received 91%, 60%,
and 68% of rate requests, respectively.

Fitch believes NSPM's pending rate proceeding carries some level of
regulatory risk particularly in light of the most recent rate order.
NSPM recently concluded its rate case and the filing for new rates
shortly thereafter may lead to overall regulatory fatigue and customer
backlash. Fitch also notes that NSPM's filing is the first rate
proceeding under which the MPUC is considering a multi-year rate
request, which adds some level of regulatory uncertainty, in Fitch's
view.

Some of the key drivers behind the rate request are the recovery of cost
overruns on the Monticello life extension and 71MW power uprate project,
recovery of Sherco Unit 3 costs disallowed in the last rate case, and
recovery of investments to maintain and upgrade infrastructure. NSPM had
initially estimated the costs associated with the Monticello project to
be $320 million, but the company's latest projections suggest a total
cost of approximately $665 million. The MPUC is conducting a prudency
review and a decision on cost recovery will be made within the scope of
the rate case. A less than balanced outcome would be credit negative for
both XEL and NSPM.

Consolidated capital expenditures remain elevated over the forecast
period. Capex is projected to amount to approximately $13 billion over
2013-2017, compared with $10.89 billion spent over the last five years.
Management expects that about 77% of capital investments will be
allocated at NSPM and PSCo, and earmarked primarily for transmission and
generation, representing 30% and 26% of consolidated capex,
respectively. Successful execution of planned capex and timely recovery
of costs incurred will be essential towards maintaining a stable credit
profile. Fitch recognizes that the utilities have various riders in
their respective regulatory jurisdictions that incentivize capital
investments and mitigate regulatory lag. Fitch considers XEL's
commitment to support the utilities' financing needs via equity
infusions to be credit supportive.

XEL has adequate liquidity to meet its short-term funding needs. Total
consolidated borrowing capacity amounts to $2.45 billion under five
separate five-year bank credit facilities. XEL has access to a total of
$800 million under its own credit facility of which $542 million was
available as of Sept. 30, 2013. As of Sept. 30, 2013, cash on hand was
$102 million. XEL also supports liquidity needs of its operating
subsidiaries by participating in a company money pool where it can lend
but not borrow funds from the pool. Consolidated debt maturities are
considered manageable with $275 million due in 2014, $250 million due in
2015, and $650 million due in 2016, including $450 million of XEL
long-term debt. Fitch expects XEL to continue to enjoy ample access to
the capital markets to issue equity and refinance long-term debt as
needed.

For the last 12 months (LTM) ending Sept. 30, 2013, the funds flow from
operations (FFO) to total interest expense stood at 5.3x and the ratio
of FFO to debt stood at 21.6%. Fitch forecasts FFO/interest expense to
sustain at about 5.3x and FFO/debt to average about 20% over the
five-year forecast horizon. XEL's stable credit profile and financial
performance will continue to be driven by the outcome of rate cases at
its operating subsidiaries and the ability of the utilities to obtain
timely and adequate rate relief for planned capital investments.

RATING SENSITIVITIES

Positive Rating Actions: Funding of a large multi-year capital
investment plan and the uncertainty associated with the outcome of
pending rate proceedings limit prospects for a positive rating action in
the near future.

Negative Rating Actions: A deterioration in the regulatory environments
of Colorado or Minnesota that result in an inability to successfully
execute and adequately recover large capital investments could lead to
negative rating actions.

Given XEL's below-industry average dividend payout, a more aggressive
dividend policy adopted by management that result in parent-level
incremental leverage or a reduction in parental equity support to the
utilities in the midst of heavy capex would likely result in negative
rating actions.

KEY RATING DRIVERS FOR PUBLIC SERVICE CO. OF COLORADO

The upgrade of PSCo's ratings is driven by PSCo's sustained strong
financial performance that result in credit metrics that are in line
with Fitch's benchmark ratios for the 'A-' rating category, and
consistent with Fitch's prior expectations. For the LTM ending Sept. 30,
2013, the ratios of FFO/interest expense and FFO/debt stood at 6.8x and
25.3%, respectively. Fitch forecasts FFO/interest expense to remain at
or above 6.0x and FFO/debt to approximate 22% over the 2013-2017
forecast period. Fitch's projections assume PSCo will continue to
achieve balanced outcomes in future rate proceedings, including the
ability to settle for multi-year rate plans.

PSCo currently operates under a three-year electric rate plan that
stipulates a $73 million base rate increase effective May 2012, a $16
million increase effective January 2013, and a $25 million increase
effective January 2014. The multi-year rate plan provides regulatory
predictability and cash flow visibility through 2014. Fitch considers
the Colorado regulatory framework to be balanced and supportive of
credit quality, and PSCo has historically done well in rate proceedings
consistently receiving more than 50% of its rate requests. Constructive
rate design mechanisms include the use of forward-looking test years,
energy and natural gas cost trackers, and multiple riders for
transmission, renewable energy, and natural gas pipeline integrity
investments.

In December 2012, PSCo filed a multi-year rate plan requesting natural
gas base rate increases of $44.8 million in 2013, $9 million in 2014,
and $10.9 million in 2015. The request is based on a 10.3% ROE, a 56%
common equity ratio, and a 2013 forecast test year. The company is also
requesting an extension of its pipeline rider, with associated increases
of $35.1 million in 2013, $26.8 million in 2014, and $24.7 million in
2015. Interim rates of $82.2 million, subject to refund, went into
effect in August 2013. The ALJ issued a decision recommending a base
rate increase of approximately $15 million, based on a 9.72% ROE, a 56%
common equity ratio, and the use of a historical test year. A final
decision by the Colorado Public Utility Commission (CPUC) is expected in
December 2013. Fitch has assumed in its analysis a rate decision that is
in line with the ALJ's recommendation. PSCo's gas business represents
approximately 20% to 25% of total earnings.

Fitch expects capex to remain elevated throughout the forecast period.
Management plans on spending a total of approximately $4.46 billion over
2013-2017, which is higher than historical norms. Key drivers of capex
over the forecast period are investments associated with the Clean Air
Clean Jobs Act (CACJA), projects related to gas pipeline integrity, and
enhancement of the distribution system. The CACJA related projects
include the shutdown of over 900MW of coal generation, the addition or
conversion of over 900MW of natural gas generation, and the installation
of pollution control equipment on over 700MW of coal generation. Overall
project is expected to be completed by 2017 and management expects to
spend approximately $685 million over the forecast period. PSCo expects
to recover capex via rate cases, and recovery through a rider mechanism
is also allowed by the CPUC. Estimated costs related to natural gas
pipeline replacement projects amount to $765 million over the next five
years, and PSCo can recover its costs through a natural gas pipeline
integrity rider, which reduces the impact of regulatory lag on operating
cash flows during the investment phase.

Fitch expects PSCo to finance capex in a manner that is consistent with
its currently authorized capital structure, using a mix of internally
generated cash flows, long-term debt issuances, and parent equity
infusions. Fitch expects internally generated cash flows to fund close
to 80% of capex requirements over the forecast period.

Fitch considers PSCo to have adequate liquidity to meet its short-term
obligations. The company has access to a total of $700 million under a
bank credit facility that expires in July 2017. At Sept. 30, 2013, PSCo
had $708.5 million of available liquidity, including $693 million of
unused facilities. Further strengthening liquidity, PSCo participates in
a money pool with its utility affiliates NSPM and SPS. PSCo maximum
borrowing limit under the money pool is $250 million, which was fully
available at Sept. 30, 2013. Under the money pool arrangement, PSCo and
its utility affiliates can borrow funds from XEL but cannot lend to it.

PSCo's long-term debt maturities are considered manageable with $275
million due in 2014 and $129.5 million due in 2017. Fitch expects PSCo
to continue to enjoy ample access to the debt capital markets to fund
capex and refinance debt maturities as they become due.

The Stable Outlook reflects Fitch's expectations that the regulated
utility will continue to achieve balanced rate outcomes in future rate
proceedings, including the ability to settle for multi-year rate plans.

RATING SENSITIVITIES

Positive Rating Actions: Given the upgrade of PSCo's ratings, future
positive rating actions are not anticipated by Fitch.

NSPM's ratings reflect the low-risk nature of its regulated utility
business that operate in what Fitch considers to be balanced regulatory
regimes across the regulatory jurisdictions of Minnesota, North Dakota,
and South Dakota. Fitch notes Minnesota represents approximately 89% of
NSPM's earnings and is the main driver of the utility's financial
performance.

Utility rate design is enhanced by the timely recovery of fuel and
purchased power costs in all three jurisdictions. Additionally, the
utilities have riders that facilitate timely recovery of environmental,
renewables, and transmission-related capital investments. Utility credit
quality is further enhanced by rate design mechanisms that include the
use of forward-looking test years in Minnesota and North Dakota, and the
ability to file for multi-year rate plans in Minnesota following an
order by the MPUC in June 2013. The multi-year plan is filed as part of
a general rate case and can be used for the recovery of costs related to
specific capital projects and appropriate non-capital projects. A
stay-out provision is in effect during the multi-year term.

On Nov. 4, 2013, NSPM filed a two-year electric rate case requesting a
base rate increase of $193 million in 2014 and an additional $98 million
in 2015. Those amounts are net of an $81 million reduction in
depreciation expense in 2014 and an additional $36 million related to
DOE refunds for settlement of various claims, which management believes
lessen the impact of a rate increase on customers. The request is based
on a 10.25% ROE, a 52.5% common equity ratio, and a 2014 test year.
Drivers of the rate request include the recovery of nuclear operating
expenses, certain Sherco Unit 3 costs that were disallowed in NSPM's
last rate case, pre-approved wind investments and costs to support the
transmission and distribution system. As permitted by state law, NSPM is
also requesting an interim rate increase of $127 million, subject to
refund, to be implemented in January 2014. Fitch expects the interim
request, if granted, to support NSPM's operating cash flows during a
period of peak capital spending. A decision on the interim request is
expected in December 2013, and a final rate decision in the first
quarter of 2015 (1Q'15).

Fitch believes NSPM's pending rate proceeding carries some level of
regulatory risk, particularly in light of the most recent order which
was less constructive than Fitch had expected. NSPM recently concluded a
rate case where it was granted a $103 million rate increase, and the
filing for new rates shortly thereafter may lead to overall regulatory
fatigue and customer backlash. Fitch also notes that NSPM's filing is
the first rate proceeding under which the MPUC is considering a
multi-year rate request, which adds some level of regulatory
uncertainty, in Fitch's view. Fitch expects the request for recovery of
cost overruns associated with the Monticello life extension and extended
power uprate project to be a focal point of the case. Management has
publicly stated that the cost of the project evolved from an original
estimate of $320 million to a final cost of $665 million. The MPUC is
conducting a prudence review of those costs, and a decision will be made
within the scope of the rate case. Fitch notes the uprate is pending NRC
approval that the utility expects to receive by the end of 2013.

A balanced rate order will be critical for NSPM to maintain its current
rating profile in light of a sizeable capital spending plan over the
next five years. Fitch recognizes there is some headroom in the ratings
given the utility's strong credit metrics for the current rating
category. For the LTM period ending Sept. 30, 2013, the ratios of
FFO/interest expense and FFO/debt stood at 6.5x and 26%, respectively.
The ratios include the impact of bonus depreciation. Fitch forecasts
credit metrics to remain consistent with current levels, with
FFO/interest and FFO/debt to average 6.3x and 24%, respectively, over
2013-2017.

NSPM plans on spending a sizeable $5.44 billion over 2013-2017 compared
with $5.27 billion over the previous five years. Capex is primarily
driven by investments in infrastructure, transmission stemming from the
CapX2020 project, renewable energy including recently approved owned
wind generation, and nuclear generation. Management is adding two
self-build wind projects in MN and ND totalling 350MW, expected to be in
service by the end of 2015. The CapX2020 transmission expansion is
expected to go in service in 2015 with total capital spending estimated
at $745 million over 2013-2015. NSPM has transmission and renewable
riders that facilitate timely recovery of capital investments.

Fitch expects capex to be funded in a manner consistent with its
authorized regulatory capital structure (52.56% common equity ratio),
including a mix of internally generated funds, long-term debt issuances,
and parent equity infusions. Fitch views parent support as credit
positive for NSPM.

NSPM has adequate liquidity to meet its short-term funding obligations
with access to a total of $500 million under a bank credit facility that
expires in July 2017. At Sept. 30, 2013, there was $500 million of
available liquidity, including $455 million of unused facilities and $45
million of cash on hand. Liquidity is also available through
participation in a money pool with its utility affiliates PSCo and SPS.
NSPM has a borrowing limit of $250 million of which $195 million was
unused as of Sept. 30, 2013. NSPM can receive funds from XEL but cannot
lend to it under the money pool arrangement. Further adding financial
flexibility, there are no long-term debt maturities until 2015 when $250
million becomes due. Fitch expects NSPM to continue to enjoy ample
access to the debt capital markets to fund capex and refinance existing
long-term debt.

RATING SENSITIVITIES

Positive Rating Actions: Given the uncertainty of the Minnesota pending
rate case, no positive rating actions are contemplated at this time.

NSPW's ratings reflect the constructive regulatory framework in
Wisconsin with rate design mechanisms that are supportive of credit
quality, and characterized by above-average authorized ROEs, forward
looking test years, purchased gas adjustment clause and annual filings
for fuel and purchased energy adjustments. The Public Service Commission
of Wisconsin (PSCW) has authorized ROEs of 10.4% for both NSPW and its
Wisconsin utility peer, Wisconsin Electric Power Co., in their most
recent rate cases. In its last electric rate case, NSPW was granted 91%
of its rate request.

NSPW has an electric case pending before the commission. The utility is
seeking an electric base rate increase of $34 million and a natural gas
base rate increase of $0 million, based on a 10.4% ROE and a 52.5%
common equity ratio, for new rates to be effective in January 2014. The
rate request is driven by investments in generation, including nuclear
plants, transmission and distribution, as well as higher operating
expenses. The gas rate request is primarily driven by the funding of the
environmental clean-up of the Ashland site. On Oct. 4, 2013, the PSCW
Staff recommended a $23.8 million electric base rate increase and a gas
rate reduction of $1.1 million, based on a 10.2% ROE. A PSCW decision is
anticipated in December 2013.

Fitch expects the rate outcome to be balanced and consistent with prior
rate decisions. NSPW's last base rate electric and gas rate increases
were approved in December 2012, and management would plan on filing a
new rate case in the spring of 2014 with new rates effective in January
2015.

NSPW has strong credit metrics for the current rating category. For the
LTM ending Sept. 30, 2013, the ratios of FFO/interest and FFO/debt stood
at 6.6x and 30.2%, respectively. Fitch forecasts FFO/interest and
FFO/debt to average 6x and 24% over 2013-2017. Part of the decline is
driven by the expiration of bonus depreciation and other tax credits.

Fitch's rating concerns relate to the relatively sizeable capital
spending program over the forecast period. NSPW plans on spending a
total of $1.13 billion over 2013-2017, higher than historical norms.
Capex is primarily earmarked for transmission spending, including NSPW's
Wisconsin portion of the CapX2020 transmission project.

Fitch expects NSPW to fund capex in a manner that is consistent with its
authorized regulatory capital structure (52.37% common equity ratio),
with a mix of internally generated funds, long-term debt issuances, and
parent equity infusions. Fitch views the parent support as credit
positive for NSPW.

NSPW has adequate liquidity to meet its short-term obligations with
access to a total of $150 million under a bank credit facility that
expires in July 2017. As of Sept. 30, 2013, total available liquidity
was $140.5 million, including $139 million of unused facilities and $1.5
million of cash on hand. There are no long-term debt maturities through
2017.

RATING SENSITIVITIES

Positive Rating Actions: No positive rating actions are anticipated in
the near future.

Negative Rating Actions: A deterioration in the Wisconsin regulatory
framework, although unlikely, could pressure the ratings.

KEY RATING DRIVERS FOR SOUTHWESTERN PUBLIC SERVICE CO.

SPS's ratings are supported by its low-risk regulated utility businesses
that operate in the regulatory jurisdictions of Texas and New Mexico.
Texas is the main driver of financial performance given it represents
approximately 74% of total earnings. Rate design mechanisms include fuel
and purchased power recovery mechanisms that limit commodity risk in
both jurisdictions. SPS has also riders for transmission and
distribution costs in Texas. Fitch considers those regulatory regimes to
be challenging from a bondholder perspective, primarily due to the
reliance on historic test years in the rate setting process, as well as
due to authorized electric ROEs that have been below industry average
over recent years. That being said, SPS has done relatively well in rate
cases. In the last Texas rate case, SPS was granted 56% of its rate
request, and its last rate case in New Mexico resulted in SPS receiving
68% of ask.

On June 6, 2013, the Texas Public Utility Commission (PUC) approved a
settlement, authorizing SPS a $50.8 million two-step electric rate
increase. The rate increase represents approximately 56% of SPS's
original request. Fitch considers the rate decision to be balanced and
consistent with current ratings. The first-step increase of $37 million
was implemented May 1, 2013, and an incremental $13.8 million increase
was effective Sept. 1, 2013. The rate order was silent regarding the
authorized ROE. The addition to rate base of approximately $702 million
of incremental investments, for the period January 2010 through June
2012, was the main driver of SPS's rate request. The rate order includes
a provision that SPS cannot file its next rate case prior to Jan. 1,
2014.

SPS has a pending rate case in New Mexico. The utility is requesting an
electric base rate increase of $32.5 million based on a 10.25% ROE and a
53.89% common equity ratio. New rates are anticipated to be effective in
1Q'14. Fitch assumes SPS will receive a rate decision that is consistent
with its recently concluded rate cases.

Fitch does not believe the August 2013 unfavorable Federal Energy
Regulatory Commission (FERC) ruling, related to a 2004 Complaint case
brought by Golden Spread, a wholesale customer of SPS, to have a
significant impact on SPS's credit quality. SPS has recorded a pre-tax
charge of $35 million in 3Q'13 associated with this matter. Fitch
expects SPS to fund this amount in a balanced manner, including through
a parent equity infusion.

Fitch forecast SPS's credit metrics to remain in line with the 'BBB'
rating category over the forecast period. For the LTM ending Sept. 30,
2013, the ratios of debt/EBITDA and FFO/debt stood at 4.1x and 15.3%,
below Fitch's benchmark ratios for the current rating category. However,
Fitch recognizes the weakness is partly driven by the temporary impact
from the FERC order, and projected credit metrics, absent the FERC
impact, are closer in line with target ratios for the current rating
category. Fitch forecasts the ratios of debt/EBITDA to be below 3.8x,
and FFO/debt to be near 19% by 2016. Fitch views balanced outcomes in
regulatory proceedings and effective cost control management as critical
to maintain current ratings.

Capex is expected to remain elevated. SPS plans on spending a sizeable
$1.84 billion over 2013-2017 compared with $1.41 billion over the five
last years. Capital spending is earmarked primarily for transmission
investments and construction of a fourth unit at the natural-gas fired
Jones Station in Lubbock, TX. The new unit will add 168MW of capacity to
the service territory. Management estimates the project to cost
approximately $118 million, including AFUDC. Jones unit 4 was placed in
service in May 2013. Fitch expects SPS to fund capex requirements with a
balanced mix of internally generated funds, long-term debt, and equity
infusion from XEL.

SPS has adequate liquidity to meet its short-term obligations with
access to a total of $300 million under a five-year bank credit
facility. As of Sept. 30, 2013, there was $301.1 million of available
liquidity, including $300 million of unused facilities and $1.1 million
of cash on hand. SPS has access to additional liquidity through its
participation in the money pool. SPS has a borrowing limit of $100
million, of which $20 million was available at Sept. 30, 2013. The only
long-term debt maturity over the forecast period is $200 million due in
2016, which Fitch expects SPS to refinance when due.

RATING SENSITIVITIES

Positive Rating Actions: No positive rating actions are anticipated in
the near term.

Negative Rating Actions: Unfavorable regulatory developments including
the inability to timely recover costs associated with SPS's large capex
program would likely lead to a negative rating action.

A shift in management strategy that results in weaker financial support
from XEL would pressure the ratings.

Fitch has upgraded the following ratings and revised the Outlook to
Stable from Positive:

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